Ayush & Donald VP & TED have been the best things which happened to me after my investment journey started otherwise I would have remained an IPO man holding upto 50 scrips.
Are you sector agnostic or avoid some sectors altogether like PSUs,Steel,Metals,financials,banks or cements? Do u think an sector like alcohol create wealth as its permeated with corruption from top to bottom and under control of mostly corrupt state govts? whats your take on textile sector?is major change happening in this sector due to various tailwinds or is it just a flash in the pan?which cos r u tracking here?
VP has been such a wonderful platform to work together.I am proud of being associated with u ,great learning experience and contributing in my v little way in stories like Premco,Avanti,PFS and some others.
“Either you are talented or you have to work very hard”. -S.P. Mittal
But what happens if you are talented and still work very hard? Results are there to see for all. Thanks for sharing the thought process.
@ayushmit
Hello Ayush,
A specific question regarding premco.
how did you build conviction on a business like premco - was it primarily through ARs/Qtrly results tracking or was it more through interaction with management/scuttlebutt & visiting their plants?
Any checklist that you follow before committing to invest?
If i may ask, Did you invest in one go after full conviction or was it a gradual averaging?
I started tracking premco when it was around Rs 70-80 but never had the conviction to buy. its a 6-bagger in my ‘watchlist’
but as a retail investor the very idea of investing in a less liquid stock looked like a huge risk at that time.
In hindsight, this looks like a big mistake but at that time, this looked like a potential landmine.
thanks for the awesome presentation - this is indeed accelerated learning for me!
I think one take away for me from the presentation is to have a very open mindset when evaluating these small companies. Sometimes there is very limited data, but if you have to look at small small things and look for hints- For e.g- Premco’s example was just brilliant.
@ayushmit How do you look at CG (Corporate Governance) in these companies? I have been guilty of missing couple of very interesting companies very early just because RPTs (related Party Transactions) were very high there. What’s your suggestion specific to CG?
polymedicure is a brilliant pick. as i am from medical device industry i can assure polymedicure can maintain a growth rate of 20-25% next 15-20 years.disposable is a risk free business and a canula, syringe, et tube can only used single time…Polymed brand is little bit costly but as there are so many corporate hospital increase in india. they are using only POlymed…Go ahead indian story is just start
@vishal Its the top 250 performers from the peak of 2008 to 15 June, 2015 from a pool of all the traded cos (about 1700). This insight came up while we were working on something and this looked interesting so we shared.
@manish26 - 1. tough to say…if a company is doing well and the understanding of the company is getting better than the holding period will be very long (several years) while when the idea is in initial stage it may get sold in few months if we are not getting convinced
2. Yes, promoter holding is really important…a promoter holding above 60% gives a huge amount of comfort and is a big positive. Debt equity should be less than 1:1. We usually don’t get interested in cyclicals but then one shouldn’t have strict rules. In ref to chemicals, yes, its not easy to get good cos but still we have invested in cos like OCCL and they have done well.
3. Yes, we do have a checklist - a part of it has been automated at screener.in in the way of pro and cons.
4. We had put up suggestions on http://dalal-street.in/
@Vivek_6954 Hi Vivek, We do avoid sectors which you have mentioned above but we not totally against them. If we get a company which is going well consistently and valuations are attractive and we can see potential going forward then most probably we will invest despite the sector classification. For eg: We have Canfin which can be classified as PSU.
Like we shared in the presentation, most of the time our starting points are the good results by the company + undervaluation. In the case of Premco the market cap was nothing and probably also due to the “call auction rule” introduced by SEBI because of which people just shunned the small cap space In the case of Premco I haven’t met the management or visited their plant. The investment just started on the basis of results and luckily the performance kept getting better and better So holding on was an easy decision. There are people who have provided very good inputs on the Premco thread on VP, you might like to check that.
I think ill-liquidity is usually a very positive sign in small cap companies which appear to be good on numbers fundamentally - as it shows that the company people are not interested in markets and are just focusing on their business While if a small cap has statistically attractive valuations but stock has very high volumes consistently (in relation to market cap) then usually its a trap (from experience we have seen that several such cases are fraud). Just think logically like in life - can you get something easily if its actually very good? Same is with stock market - i have seen that stocks which are really good are always ill-liquid till they reach a very big market cap (often they still remain ill-liquid )
Friends, first of all I would like to introduce you all to Rohit - I have been interacting with him and he is doing amazing work! He loves focusing on mid/small cap companies on does very good hard work (along with his friend Rajat) in terms of understanding the industry, product etc and completing the whole picture. I really wish I could work as hard and smart like him. Do keep a close watch on his posts
Yes, CG is an issue but when starting out on a company I think the focus should be on first understanding the business and what the co is doing. I have often seen that people get lost or reject an idea quickly on finding a issue which in actual might be irrelevant or not meaningful. At the end it should boil down on the intent of the company - are they trying to cheat minority from time to time? or is it one off ignorable case.
excellent stuff @ayushmit, it has been a excellent feeling reading your presentations and other research work going on here. some of the ideas are too good like premco.
I am often impatient with illiquidity, but have noticed such stocks do well quietly (like tasty bites). need conviction on the business of such unknown and hence less frequently traded ideas
Thanks @ayushmit for sharing your wisdom with us.
My first reaction was that I am stunned by the hardwork put in by you, its inspiring and intimidating as well.
Congrats for such early success in early part of life, as all good things compound, I am and so sure that you will really go a very long way and some of the prediction above seem realistic.
Congrats again and Best wishes
My silly question will follow later, I am still reading and rereading your comprehensive document.
Do you actively look for mispriced bets with a duration of 1-2 yr holding?
Or,
As an outcome of your research where in the BQ is good, but there is no conviction in the long term sustainable growth - do u still buy if it is mispriced?
Excellent presentation. Feeling blessed again to be part of this group of talented and hard working people.
My question is about something which is not covered in your PPT
What’s your thought process on the expensive but consistent star performers.For example Eicher or Page etc…
Ayush- there’s so much to learn from your approach. Thanks for sharing. I have a similar question to what Raj has written- would u look at investing in expensive stocks like an Eicher or Page or do u think the margin of safety is too low. A little down in the Price earning multiples like Cera, Astral, Greenply etc- would these be sensible investments at current prices ?
Thanks for taking time out for sharing your views @ayushmit .
I get a good sense of how much more thoughtful analysis is needed on my part w.r.t small cap investing.
my experiences, where in very liquid stock ends up becoming illiquid, has made me somewhat hesitant in this regard but i’ve learnt a lot from those experiences and from folks like yourself.
Many thanks for the presentation Ayush. Also, thanks for taking your time to share your thoughts and answering the many queries.
As posters have mentioned here, the amount of work which you do is overwhelming. I also note that you seem to have a brilliant nous - almost a sixth sense when it comes to picking stocks. Its as if you have developed the right portion of your brain to work even faster than the left portion - that’s igniting to see! The third thing which I’d compliment you for is the humility which you have in all your posts, it is something which really stands out.
I have two questions for you; would be fantastic to hear from you on these, if possible.
Question 1:
To my mind (in a very crude manner), it seems that you have two types of classifications (Apart from the Fisher & Graham classifications) -
a) Companies which are doing well already, but are undervalued or undiscovered
b) Companies which are on the verge of a turnaround or have just about started doing well.
It is obviously b) which is much tougher to master, and I would love to pick your brains further on this - How do you get confidence about potential turnarounds, how do you judge whether the odds of the company doing well in the future are good (rather than the latest quarter just being a flash in the pan). You have taken the example of Avanti and explained a few things which I could gather you look for
Management commentary
Reducing debt
Industry patterns
Past track record
What are the other aspects which you look for in turnarounds? What helps you build conviction that the turnaround is sustainable?
Question 2:
This is digging into one of your trade secrets (and the question might be a little frivolous) - please answer only if you feel like:
How do you keep track of the sheer number of companies which you do? How do you start, how do you decide which reports to read or dig into? How do you track quarterly numbers? My intention here is to figure out your methods and habits around these aspects.
Hi Ayush,
Thanks to You and Donald and other senior members I have gained a lot from the forum.
Could you please elaborate the above statement or if possible give a couple of examples with period so that the matrix becomes more clear.
@ayushmit- what was it that attracted you to arex, GRP. could you elaborate why do u think it didnt work out. maybe your advice will help us weed out losers in future
Thank you for excellent presentation. I like the ease with which you and Hitesh bhai do things. It’s like watching Tendulkar bat .
Now to Questions:
I would love it if you can answer Karan’s Question # 2 on tracking companies. I have a day job (60 hours/week) in a software company and weekend is only time I really get to read. I am usually several days/weeks behind the VP forum in terms of reading. So any habits that can help me become efficient would be really appreciated.
Also I tend to forget the story of a company if I’m visiting it say after 6 months. Donald’s/VP BQ template, it has helped me greatly to remember the core story of company in 10-15 lines. Any other tricks you use? Or it’s just practice over the years?
Also regarding lack of liquidity, how do you differentiate this from operator driven trading? I have faced some stocks which go through upper/lower circuits without retail investor managing to buy or sell for days. (Eimco Elecon, 8K Miles Soft etc.)
In the case of Premco I haven’t met the management or visited their plant. The investment just started on the basis of results and luckily the performance kept getting better and better 
